On
June 29, German Chancellor Angela Merkel
acquiesced to changes to a permanent eurozone
bailout fund - "before the ink was dry", as
critics complained. Besides easing the conditions
under which bailouts would be given, the
concessions included an agreement that funds
intended for indebted governments could be
funneled directly to stressed banks.
According to Gavin Hewitt, Europe editor
for BBC News, the concessions mean that:
[T]he eurozone's bailout fund
(backed by taxpayers' money) will be taking a
stake in failed banks.
Risk has been
increased. German taxpayers have increased their
liabilities. In future a bank crash will
no longer fall on the
shoulders of national treasuries but on the
European Stability Mechanism (ESM), a fund to
which Germany contributes the most.
In
the short term, these measures will ease
pressure in the markets. However there is
currently only 500 bn euros [US$631 billion]
assigned to the ESM. That may get swallowed up
quickly and the markets may demand more. It is
still unclear just how deep the holes in the
eurozone's banks are.
The ESM is now a
permanent bailout fund for private banks, a sort
of permanent "welfare for the rich". There is no
ceiling set on the obligations to be underwritten
by the taxpayers, no room to negotiate, and no
recourse in court. Its daunting provisions were
summarized in a December 2011 youtube video
originally posted in German, titled "The shocking
truth of the pending EU collapse!" [1]:
The treaty establishes a new
intergovernmental organization to which we are
required to transfer unlimited assets within
seven days if it so requests, an organization
that can sue us but is immune from all forms of
prosecution and whose managers enjoy the same
immunity. There are no independent reviewers and
no existing laws apply. Governments cannot take
action against it. Europe's national budgets
[are] in the hands of one single unelected
intergovernmental organization.
Here
are some of the ESM's key provisions [2]:
Article 8: "The authorised capital stock
shall be EUR 700 000 [700 billion euros]."
Article 9: "ESM Members hereby irrevocably and
unconditionally undertake to pay on demand any
capital call made on them ... such demand to be
paid within seven days of receipt." Article
10: "The Board of Governors ... may decide to
change the authorised capital and amend Article 8
... accordingly. Article 32, paragraph 3: "The
ESM, its property, funding, and assets ... shall
enjoy immunity from every form of judicial process
..." Article 32, paragraph 4: "The property,
funding and assets of the ESM shall ... be immune
from search, requisition, confiscation,
expropriation, or any other form of seizure,
taking or foreclosure by executive, judicial,
administrative or legislative action." Article
30: " ...Governors, alternate Governors,
Directors, alternate Directors, as well as the
Managing Director and other staff members shall be
immune from legal proceedings with respect to acts
performed by them in their official capacity and
shall enjoy inviolability in respect of their
official papers and documents."
And that
was before Merkel's recent concessions, which
allow this open-ended indebtedness to be funneled
directly to the banks.
Why did Merkel
cave? "Reactions back home were
devastating," reported der Spiegel. "[T]he
impression was that [Merkel] had been
out-maneuvered by Italian Prime Minister Mario
Monti and Spanish Prime Minster Mariano Rajoy."
As of June 21, 13 of 17 countries still
had not ratified the ESM; the most important
ratification needed was Germany's, the largest
economy in the eurozone. Earlier, Merkel had
opposed using the bailout fund to pump money
directly into struggling European banks. But at
the EU summit that began on Thursday and dragged
on well into the night, she finally relented. Late
Friday evening, German lawmakers voted 493-106 in
favor of the 700 billion euro permanent bailout
fund.
What caused Merkel to back down?
According to an article in The Economist, the late
night was "filled with bluff and bluster", in
which
Mariano Rajoy, the Spanish prime
minister ... , along with Italy's Mario Monti,
had threatened to block any agreement at the
summit unless their demands were met. Mr Rajoy
obtained satisfaction, but the same is not quite
true of Mr Monti, who had been the most adamant
of the two.
Monti declared himself
satisfied, but caused considerable irritation to
partners. Among the deals he had blocked was the
"growth pact", a mixture of stimulus measures.
What Monti achieved by this maneuver
was not clear:
"Who needs the growth pact? Not
Germany," said one bemused participant. The euro
zone's fiscal hawks say the bond-buying
mechanism will be little different from the
existing system. "Mario Monti raised a gun to
his head and threatened to shoot himself. In the
end he wounded himself in the shoulder," said
one scornful diplomat.
Maybe. Or maybe
the bond-buying mechanism was not what he was
really after.
The Italian coup
d'etat There is reason to suspect that
"Super Mario" Monti may be representing interests
other than those of his country. He rose to power
in Italy last November in what critics called a
"coup d'etat engineered by bankers and the
European Union". He was not elected but stepped in
after Prime Minister Silvio Berlusconi resigned
under duress.
Monti is not only an
"international advisor" to Goldman Sachs, one of
the world's most powerful financial firms but a
leader in the Bilderberg Group and the Trilateral
Commission (see below). In an article in The New
American, Alex Newman calls these clandestine
groups "two of the most influential cabals in
existence today". Monti is listed as a member of
the steering committee on the official Bilderberg
website and as the European Group chairman on the
Trilateral Commission website.
The
Trilateral Commission was co-founded in 1973 by
David Rockefeller and Zbigniew Brzezinski, also
Bilderberger attendees. The commission grew from
the thesis in a 1970 piece by Brzezinski "Between
Two Ages: America's Role in the Technetronic Era"
that a coordinated policy among developed nations
was necessary in order to counter global
instability erupting from increasing economic
inequality. He wrote in his 1997 book The Grand
Chessboard that it would be difficult to get a
consensus on these issues "except in the
circumstance of a truly massive and widely
perceived direct external threat".
Naomi
Klein calls it "the shock doctrine" - an induced
disaster forcing austerity measures on sovereign
nations. In desperation, they would come to heel,
relinquishing the sovereign right of governments
to an unelected body of technocrats. And that is
what the ESM seems to achieve.
Rockefeller
notoriously wrote in his 2002 autobiography, "Some
even believe we are part of a secret cabal working
against the best interests of the United States,
characterizing my family and me as
'internationalists' and of conspiring with others
around the world to build a more integrated global
political and economic structure - one world, if
you will. If that's the charge, I stand guilty,
and I am proud of it."
Implementing the
shock doctrine In another bankers' coup
last November, former Goldman Sachs executive
Mario Draghi replaced Jean-Claude Trichet as head
of the European Central Bank. The European
Stability Mechanism quickly followed. It was a
permanent rescue facility intended to replace
certain temporary facilities as soon as the member
states had ratified it, slated to occur by July 1,
2012.
The ESM came to an initial vote in
January 2012, when it was passed in the dead of
night with barely a mention in the press.
The recent modifications were also agreed
to in the dead of night, ostensibly because Italy
and Spain were afflicted with onerously high
interest rates. But there are other ways to bring
down interest rates on sovereign debt besides
forcing whole countries into open-ended pacts to
bail out private banks for unlimited sums in
perpetuity, in the hope that the banks might bail
the governments out in return.
The US 2012
budget deficit is significantly worse than either
Italy's or Spain's, yet somehow the US has managed
to keep interest rates on its debt at record lows.
How has it pulled this off?
One theory is
that JPMorgan's US$57 trillion in interest rate
swaps have something to do with it. Another
explanation, however, is that the Federal Reserve
has simply stepped in as lender of last resort and
bought up any debt not sold at the low rate set by
the Treasury, using "quantitative easing" (money
created on a computer screen). Between December
2008 and June 2011, the Fed bought a whopping $2.3
trillion of US bonds in two rounds of quantitative
easing.
Why can't the European Central
Bank do the same thing? The answer is that there
are rules against it, but rules are just arbitrary
agreements. They can be changed by agreement - and
often have been, to save the banks.
As the
cynic quoted in The Economist article above
observed, the bond-buying mechanism for countries
under the ESM will be little different from the
existing system. Mario Monti said the plan will
support government bond prices only in countries
that comply with fiscal targets, and that it will
act as an incentive for governments to follow
virtuous policies.
That means avoiding
deficits, even if it requires further austerity
measures and selling of assets. On the public
level, that could mean national treasures like the
Acropolis. On the private level, The New York
Times reported Friday that some desperate out
-of-work Europeans were going so far as to sell
their kidneys to pay household bills. The shock
doctrine, it seems, has come to the doorsteps of
privileged Westerners.
The German
diplomats negotiating the ESM did leave open some
escape hatches, including a request by Germany's
highest court to the country's president not to
sign the treaties into law until a legal review
can be completed. At least 12,000 complaints are
expected to be filed with the Federal
Constitutional Court regarding the ESM and the
fiscal pact. The legal review could well conclude
that the ESM illegally hijacks taxpayer funds for
private bank profit.
It is one thing to
pool national resources to bail out other
sovereign governments, quite another to write a
blank check to bail out the profligate private
banks that precipitated the global downturn.
Europe has a strong tradition of publicly owned
banks. If the people must bear the costs, the
people should own the banks and reap the benefits.
Notes: 1. For "The
shocking truth of the pending EU collapse!", see
here. 2.
For ESM provisions, see here.
Ellen Brown is an attorney and
president of the Public Banking Institute, PublicBankingInstitute.org.
In Web of Debt, her latest of 12 books, she
shows how a private cartel has usurped the power
to create money from the people themselves, and
how we the people can get it back. Her websites
are webofdebt.com and
ellenbrown.com.
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